A bond with a face value of $1,000 has 10 years until maturity, carries a coupon rate of 7.9%, and sells for $1,110. Interest is paid annually. (Assume a face value of $1,000 and annual coupon payments.) a. If the bond has a yield to maturity of 10.1% 1 year from now, what will its price be at that time? (Do not round intermediate calculations. Round your answer to nearest whole number.) Price 874 o. What will be the rate of return on the bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.) Rate of return % c. If the inflation rate during the year is 3%, what is the real rate of return on the bond? (Assume annual interest payments.) (Do hot round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.) Real rate of return

A bond with a face value of $1,000 has 10 years until maturity, carries a coupon rate of 7.9%, and sells for $1,110. Interest is paid annually. (Assume a face value of $1,000 and annual coupon payments.) a. If the bond has a yield to maturity of 10.1% 1 year from now, what will its price be at that time? (Do not round intermediate calculations. Round your answer to nearest whole number.) Price 874 o. What will be the rate of return on the bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.) Rate of return % c. If the inflation rate during the year is 3%, what is the real rate of return on the bond? (Assume annual interest payments.) (Do hot round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.) Real rate of return

Fundamentals of Financial Management, Concise Edition (MindTap Course List)

9th Edition

ISBN:9781305635937

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter7: Bonds And Their Valuation

Section: Chapter Questions

Problem 16P: BOND VALUATION You are considering a 10-year, 1,000 par value bond. Its coupon rate is 8%, and...

See similar textbooks